Managerial Ability, Compensation and the Closed-End Fund Discount

Managerial Ability, Compensation and the Closed-End Fund Discount

By
Jonathan B. Berk, Richard Stanton
Journal of Finance.
2007, Vol. 62 , Issue 2, Pages 529-556

This paper shows that the existence of managerial ability, combined with the labor contract prevalent in the industry, implies that the closed‐end fund discount should exhibit many of the primary features documented in the literature. We evaluate the model's ability to match the quantitative features of the data, and find that it does well, although there is some observed behavior that remains to be explained.